California Wins Chief Executive.net's Worst State for Business

12 May 2014

ChiefExecutive.net 10th annual survey of 500 CEOs from across America on their views of the best and worst states for business rated California “The Worst,” and Texas “The Best.”

The annual survey of business leaders asks each CEO to grade states on a “variety of measures of tax and regulatory regime, the quality of the workforce and the quality of the living environment” that are viewed as critical components of its business climate, while employees’ attitude toward management is considered a crucial factor in the perceived quality of a region’s workforce. Important living factors include public education, health, the cost of living and affordable housing.

Texas continued its 10-year reign as the best state overall–but Florida, which ranks No. 2, is edging up and even overtaking Texas in its quality of living environment. Florida Governor Rick Scott told Chief Executive: “We’ve learned from Texas how to tell our story better and it helps that we’ve cut taxes 25 times–about $400 million.”

Scott proudly highlighted what he called the “flywheel effect,” in which big name companies like Hertz, Amazon, Deutsche Bank and Verizon invest in the state, adding jobs and creating momentum that causes more companies to look at Florida. Scott emphasized that “Business is comfortable that we’ll keep the tax base low and improve our workforce.”

Louisiana was called the Cinderella state by Chief Executive for jumping “31 positions from 40th in 2010 to No. 9 this year.” CEOs credited the state for making a “concerted effort to transform old habits and policies.” Wisconsin was also recognized for Governor Scott Walker having survived a bitter recall election and still being able to guide the state from “41st five years ago to 14th in 2014.”

California, New York and Illinois continued their ranking as the worst three states in the nation. Despite Governor Jerry Brown’s achieving a budget surplus, the state continues to have the highest personal income tax rates and “regulates with a very heavy hand….Its top marginal tax rate of 33 percent is the third-highest tax rate in the industrialized world, behind only Denmark and France.” The survey said that California “creates a bias against savings, slows economic growth and harms competitiveness.”

The Economist magazine reported that it takes two years to open a new restaurant in the California, compared to six to eight weeks in Texas. That is why CKE Restaurants (owner of Carl’s Jr.) moved from Carpinteria, California and is committed to opening 300 restaurants in Texas, but has no plans for new restaurants in California.

The most interesting comment in the ChiefExecutive.net report came from Richard Fisher, CEO of the Dallas Federal Reserve: “California likes to say that Texas can have all those low-wage jobs, but from 2000 to 2012, job growth percentage change by wage quartile was better in Texas.”